In this paper we use a simple bureaucracy model of fiscal illusion to analyze the impact of intergovernmental grants on cost efficiency of local jurisdictions. We find that a higher degree of redistribution within a system of fiscal equalization or an increase in the amount of grants received by a local jurisdiction leads to an extension of organizational slack or X-inefficiency in that jurisdi...

This article examines fiscal illusions in public finance systems where decentralisation involving the introduction of an independent and autonomous component local government funding brings new problems. It presents a synthesis findings from Polish empirical study that set out to determine types extent illusion among councillors, focusing on qualitative aspects phenomenon. also compares with ot...

Following the present atmosphere of budgetary cuts in the OECD countries we analyze the effects of fiscal consolidation in the composition of government expenditures by functions. We modify a standard median voter demand model to incorporate a form of fiscal illusion based on the idea that voters-taxpayers may not be fully aware of the true composition of government expenditures because all typ...

Wallace E. Oates lectures at the Departmenr of Economics and Bureau of Business and Economic Research, U niversiry of Maryland. This chapter was written during sabbatical leave at Resources for the Future. I am grateful to RFF and to the Sloan Foundation for their support of this work. I am also indebted to Dennis Mueller, Paul Porrney, and Robert Schwab for some most helpful commenrs on an ear...